These are exciting times for ambitious charities and social enterprises in the UK. The government recognizes the difference they can make providing key services and creating jobs and wealth in their communities, and is encouraging them to scale up their activities and bid for public contracts.
Around the country the social sector is worth £55 billion, supporting more than 2 million jobs. More than one in four social enterprises does work for the public sector, encouraged by policies such as the Localism Act.
The social investment market has grown strongly to fund this expansion of activity and demand is expected to reach around £1 billion by 2015/16. New forms of investment, such as social impact bonds, have been developed to target investors who seek both a social and a financial return on their money.
But as the market grows more sophisticated many charities are finding that they don’t have the skills to seize the new opportunities. Raising millions of pounds of investment and bidding against commercial organizations for public sector contracts requires specialist skills in law, financial management, corporate finance and public service commissioning.
The Investment and Contract Readiness Fund was launched in May 2012 to tackle these problems. It is the world’s first fund designed to equip charities and social enterprises with the business skills they need to raise serious amounts of investment and compete for public service contracts, and it is making ‘a significant and positive impact’, according to a report from the Boston Consulting Group, released on 9 April.
The £10 million fund, financed by the Cabinet Office and managed by the Social Investment Business, has made grants to 94 ventures worth £8.9 million. Of those, 74 are still carrying out their business support programmes, but the first eight have already raised investment and won contracts worth a total £35 million.
Pure Innovations, a charity that supports disadvantaged people, used to have a poor record of winning tenders but a £52,250 ICRF grant helped it secure a five-year contract worth £11.7 million from the Royal Borough of Kingston to take over the running of its learning disability service.
Doug Cresswell, CEO of Pure Group, said: ‘The ICRF grant has made a very tangible and positive difference. It enabled us to undertake a focused review of our growth plans and crucially to secure high-quality tendering and bid-writing support. As a result of winning the Kingston contract we have significantly increased our group turnover and rapidly extended our reach to vulnerable people.’
Empower Community received a £108,650 ICRF grant, which helped it take its model to the mainstream investment market and secure a £10.1 million 20-year loan from a UK institutional pension investor. It used the funds to buy existing solar panels on 2,327 social homes in Sunderland owned by Gentoo housing association, and it will continue to provide tenants with free daytime electricity, which can reduce bills by up to 40%. The refinancing will allow Gentoo to install solar panels on up to 3,000 more homes in the city.
Alex Grayson, managing partner at Empower, says: ‘The beauty of this deal is that everybody’s interests are aligned: the investor makes solid financial returns, with measurable social and environmental impact; tenants enjoy access to free daytime power, which helps them escape fuel poverty; Gentoo enjoys an ongoing return and financing to continue their exciting developments; and the community receives funding for local initiatives from the profits.’
Boston Consulting Group found evidence that the ICRF is starting to change the market. Ventures that have received business support say their skills and knowledge have increased significantly and 70% expect to need less help in the future. They are more willing to pay for these services as they become aware of the benefits they can bring. And the fund has increased the professional support available.
The ICRF Investor Panel has been fundamental to this success, allowing major social investors to review ventures’ plans to scale up their operations and impact. The panel, which decides which applicants receive business support grants, is chaired by Big Society Capital, and includes the Big Lottery Foundation, NatWest, Triodos Bank, Bridges Ventures and the FSE Group.
We want to build on this success. We’ve already started introducing repayable components of grants, to ensure ventures have more skin in the game, and we hope this will also allow business support to be spread more widely.
We hope the stories of pioneers like Pure Innovations and Empower will show charities and social enterprises how professional business support can help them realize their ambitions and encourage them to think big.
Jonathan Jenkins, is CEO of the Social Investment Business, one of the UK’s leading social investors, which has invested more than £340 million in over 1,300 charities and social enterprises since 2002. @TheSocialInvest